The verdict of the Scottish court convicting a member of the Libyan intelligence service for the Lockerbie bombing presents President Bush with his first foreign policy challenge.

How far does he press the issue with Libya now? His options appear to be limited.

For the moment, he is following very much the lines laid down by the Clinton administration.

Libyan officials have labelled calls for compensation as racist

They were spelled out by the State department spokesman Richard Boucher, who said that the United Nations sanctions against Libya should not be formally ended - they are currently suspended following Libya's agreement to hand over the defendants - until Libya has fulfilled other Security Council requirements.

Those requirements include ending support for all terrorism, acknowledging responsibility for Lockerbie, disclosing all it knows about the crime and paying appropriate compensation.

And American sanctions - trade and travel restrictions and a ban on American oil company work in Libya - will remain.

They were imposed because the United States considers Libya a state supporter of terrorism and still does.

At a later briefing by a senior administration official, however, it was made clear the US will not leave the case here and will follow the evidence, if there is any, wherever it leads.

Bush's options

And the Libyan reaction suggests that this is not the end of the affair.

Libya's Foreign Affairs Minister, Abdel-Rahman Shalqam, dismissed calls for compensation as racism. Nobody had compensated Libyans who were bombed, he said by American planes in 1986.

So what can Mr Bush actually do? He will keep the sanctions on, even though the UN ones are not effective any more, and he will maintain the American ones.

And investigations will continue although opponents of the Libyan Government will ask why any further inquiries are needed. The court, they say, established who was behind this crime.

Will he go further? Under Ronald Reagan, America often wielded a big stick but the American and British decision to tread a legal path to the Scottish court instead of sending in the warplanes suggests that those days are over as far as Libya is concerned.

The issue of sanctions is also testing the administration because it does not like them, as the Secretary of State Colin Powell told his Senate confirmation hearing.

US and UK diverge

So Mr Bush is coming up against the realities of policy choices. He cannot loosen sanctions without angering the American relatives of the atrocity.

If Mr Bush loosens sanctions, he risks angering the families of American victims

Yet he cannot do much else because the US and British Governments went to court to try to convict Libyan officials, not to go to war against the Libyan Government, as would have happened in the last century.

He is also aware that American policy is diverging from that of its close ally, Britain, let alone other countries that feel that now is the time to close this chapter.

Britain re-established relations with Libya some time ago after an agreement dealing with Libyan responsibility for the shooting of a London police officer.

So even though the US and the UK were in step over Lockerbie, they are not so over their own approaches to Libya.